Central banks keep markets range bound

Global and Philippine Market Update
March 28 to April 3, 2024

Global Markets 

Global Stocks ended mixed as investors speculate on the directions of central banks.

• In February, inflation met expectations, potentially prompting the Federal Reserve to maintain its current stance before contemplating interest rate adjustments, as indicated by a key metric favored by the central bank. The Commerce Department reported that the personal consumption expenditures price index, excluding food and energy, rose by 2.8% over the previous 12 months and by 0.3% compared to the previous month, aligning with forecasts from Dow Jones.

• Finance Minister Suzuki warned against speculative currency moves unrelated to economic fundamentals, citing factors like Japan's central bank decisions, economic indicators, and market sentiment. Despite the Bank of Japan's recent policy change to end negative interest rates, the yen has continued to decline, hitting a 34-year low against the dollar last week at 151.975 and trading at 151.315 per dollar early Monday.

• Inflation in Europe last March unexpectedly slowed to 2.4% — below the 2.6% forecast. Core inflation, excluding volatile items, decreased by 2.9% from 3.1%. However, service inflation remained at 4% due to ongoing pressure from wage growth. The European Central Bank (ECB) is now expected to begin lowering interest rates in June, as reflected in recent statements from ECB decisionmakers.

Philippine Stocks

Philippine Stocks struggled to move beyond the 7,000 level.

• Moody’s Ratings forecasts that the Philippines will maintain its position as the second-fastest growing economy in Southeast Asia in both 2024 and 2025, fueled by resilient domestic demand. The agency also notes unchanged forecasts for both the Philippines and Malaysia for 2024 and 2025, with expectations of increased growth sequentially in both countries. According to a report, domestic demand continues to be the primary driver of economic expansion in the Philippines.

• National Economic and Development Authority (Neda) Secretary Arsenio Balisacan announced that the government has adjusted its economic growth forecast for 2024, narrowing it to a range of 6 percent to 7 percent from the previous range of 6.5 to 7.5 percent. Balisacan attributed this revision to the country's economic performance in 2023, where growth fell short of expectations at 5.6 percent, below the targeted range of 6 percent to 7 percent and slower than the 7.6 percent expansion seen in 2022.

Philippine Bonds

Philippine Bond yields trended higher in line with US treasuries.

• The Bureau of Treasury (BTr) fully awarded a reissued treasury bond with a remaining term of six years and nine months at an average rate of 6.299%. The rate was slightly higher than comparable bonds prior to the auction. The higher yield was driven by a wider budget deficit and indications from central banks that rates will remain higher for longer.

• Rice prices in the Philippines will stay high until midyear due to effects of El Niño. To ease short-term price pressures, the government considers allowing more imports, while stabilizing trade policies and boosting domestic productivity are seen as long-term solutions.

FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) PCE inflation report February 2024: Key Fed inflation gauge rose 2.8% annually as expected (cnbc.com) (2) Japan’s Finance minister says speculative market moves affecting yen - BusinessWorld Online (bworldonline.com) (3) https://www.cnbc.com/2024/04/03/euro-zone-inflation-march-2024.html (4) https://www.bworldonline.com/top-stories/2024/04/03/585333/phl-growth-likely-2nd-fastest-in-se-asia-2/ (5) https://business.inquirer.net/453255/govt-cuts-economic-growth-target-for-2024 (6) https://www.pna.gov.ph/articles/1221870 (7) https://www.bworldonline.com/top-stories/2024/04/04/585681/rice-prices-to-remain-high-until-midyear-da/

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.